Valuation Case Study on STX OSV Vard

Valuation Case Study on STX OSV Vard

Disclaimer and Declaration

The objective of the presentation is for educationalpurposes. The full content of the presentation is forillustration purposes only and should not be used asinvestment recommendations. AB Maximus and itspresenters are not responsible for all investment activitiesconducted by the participants and cannot be held liablefor any investment loss.

The company and presenters may have personal interestin the particular shares presented.

Agenda

1)Company Background 2)Industry Overview3)Stock Classification 4)Valuation 5)Risk

Company Background

STX OSV Vard is is a major global shipbuilder, constructing offshore and specialized vessels used in the offshore oil and gas exploration &

production and oil services industries.

Company Background

Source: Company’s Website

Company Background

Source: Company’s Annual Report 2011

Company Background

Source: Company’s Annual Report 2011

�Company Specialties:

AHTSPSV

Company Background

Source: Company’s Annual Report 2011

�Company SpecialtiesOSCV

Other Specialized vessels

Company Background

Source: Company’s Q4 Report 2012

�Order Book development: negatives and positives

Company Background

Source: Company’s Q4 Report 2012

�Order Book status:

Company Background

�Company disclosure 2012:

Source: Company’s Q4 Report 2012

Industry Overview

�Offshore Market forecast 2013:

Source:http://www.simic.net.cn/news_show.php?lan=en&id=119646

Investment in offshore vessel & facility in 2013 is predicted to record 639 orders, increased by 31% from 489 vessels/units in 2012, according to Clarkson Research and industry sources8..

Mobile offshore fleet has been expanding by 4% in yearly average since 1996, particularly, supply vessel segment, including AHTS and PSV, has grown by about 100% since early 1996.

Industry Overview

Source:http://www.fxempire.com/fundamental/fundamental-analysis-

reports/crude-oil-fundamental-analysis-march-12-2013-forecast/

� Oil prices to remain flat:

Crude Oil is flat moving between small gains and losses as traders are undecided as to what to do in the commodities markets. Equities are down today as traders take advantage of huge climbs to book profits. Crude prices were up at the end of the week on better than expected non-farm payroll data and lower unemployment rate brightened the demand outlook for crude and supported prices.

However poor economic data from China for retail sales and industrial output is likely to keep prices in check. Traders can expect crude oil prices to go slightly up as economic recovery in US and positive German trade balance expected today can support prices.

Industry Overview

Source:http://www.fxempire.com/fundamental/fundamental-analysis-

reports/crude-oil-fundamental-analysis-march-12-2013-forecast/

� Oil prices to remain flat:

Stock Classification

�Revenue Stabilized.

Source : Company Annual Report 2011

Q4 Report 2012

Stock Classification

�EBITDA: up and down.

Source : Company Annual Report 2011

Q4 Report 2012

Stock Classification

�Cash position: Looks unstable

Source : Company Annual Report 2011

and Q4 report 2012

Stock Classification

� Dividend yield history: Somewhat consistent not sure it will continue.

Source : Company Annual Report 2012

2012 2011

Div per share 0.13 0.10

Share price end year 1.30 1.16

Div yield 10% 9%

Stock Classification

Indicators point to this as a Growth stock valued for its

growth potential

Valuation

�Methodology

�Discounted cashflow

�P/E comparison

ValuationRisk Free Rate 2.5%

Market Required Return 10.0%

Beta 0.83

Cost of Equity (CAPM) 8.73%

Risk Premium for Terminal Value Return

2.0%

Growth Terminal 2%

Growth Initial 4%

Proportion of Debt 0.073

Cost of Debt 2.4%

Proportion of Equity 0.9267

Tax rate 33%

WACC 10.06%

Valuation

Based on FCFF model:

Valuation

Inputs NKR FY 2012:

Item Amt M NKR

OCF 993

Less CAPEX 403

Add Adjustment for extraordinary expense 259

FCFF 849

Valuation

Project 3 years at 4% with 3rd year terminal

Item Amt M Currency

Firm Value 9,757 NKR

Less Borrowings 3,930 NKR

Add Cash 2,437 NKR

FCFF valuation 8,264 NKR

Total Share Outstanding 1,180

Value per share 7 NKR

Covert to SGD /4.64 1.51 SGD

Valuation (P/E Comparison with Peers)

Company P/E

ASL Marine Holdings Ltd 8.72

COSCO 19.17

Dyna Mac Holdings 18.8

Jaya Holdings Ltd 7.81

Nam Cheong 8.73

Yangzijiang 5.01

STX OSV 7.42

Average P/E 10.8

Source: www.markets.ft.com

STX OSV FY 2012 EPS = SGD $ 0.1678Implied FV = 0.1678 x 10.8 = 1.81

Trading Data

52 Weeks Trading Range $1.01 - $1.36

Avg Volume (30 days) 8,383,634

Market Cap $1.45 B

Today’s Price: 1.275

Main Risks

�Market Risk : Oil prices, global economic activity

�Operational risk: Fixed price contracts

�Finance and Investment risk: Forex, Forward contracts for hedging

�Human Resource Risk: High turnover in Brazil

Main Risks

�Default Risk – Low

� Current ratio = 1.18x

� EBITDA Interest coverage = 113.3x

� D/E ratio = 0.18

� Cash = $529 mil